Institutional change and business system diversity : continuities and contradictions in postcolonial Cyprus

This thesis analyses institutions and business system characteristics in Cyprus with the aim of describing economic organisation patterns in the country and discussing issues of institutional change and business system diversity. More specifically, by reviewing the development and current features of the legal, financial and education systems, industrial relations and authority relations, the extent and kind of British colonial influence on each institution is examined and the ways in which transformed institutions shape ownership and control of firms, relations between them and employment practices are explored. Research findings are expected to contribute to existing empirical knowledge regarding the different ways of organising and controlling economic activities by describing arrangements in a postcolonial society and inform theoretical analyses of processes of institutional change and the impact of colonial rule on economic organisation. Results indicate that the colonial experience transformed completely institutions like the legal system and greatly influenced aspects of the development of others, such as the education and financial systems, authority relations and industrial relations. These institutional changes contributed, first, to the creation of a significantly different institutional environment compared to neighbouring countries that were not colonised by a major European power and, second, led to considerable heterogeneity in some if its aspects. This institutional environment offered more potential for business system diversity and two major groups of firms may be identified with distinct business system characteristics in Cyprus, private firms and banks. The former group consists of firms that are largely family owned and controlled, are characterised by authority relations that are more paternalistic and exhibit employment practices that are more informal whereas in banks, ownership is largely market based, control more decentralised, relations with other firms more adversarial, authority relations less paternalistic and employment practices more formal. The empirical analysis suggests a number of theoretical points regarding colonialism, institutional change and business system diversity. First, it highlights that the three key mechanisms driving institutional change - the coercive, the mimetic and the normative - can be identified as contributing to institutional conversion during colonial rule. Coercive mechanisms may include the introduction of a new government administration system whereas mimetic processes, such as copying some of the colonial power's systems, and normative pressures due to the interaction between colonial power and colony were also common. Second, it shows that both radical and evolutionary change of institutions take place. The introduction of a new legal system is an example of abrupt change whereas the influence on the education system, and indirectly on people's values, is more incremental. Third, it suggests that the kind, extent and the rate of institutional conversion depends on the nature of each institution but also on power dynamics and preferences of individual and collective actors in both the exporter and receiving country. These observations highlight, fourth, the role of institutional entrepreneurs who influence institutional development by reflecting on structures, using their analytical and political skills and mobilizing others. Finally, these multiple influences on institutions are likely to result in considerable diversity within them, something that gives firms more 'social and economic space' from which to choose and formulate their own distinctive business system characteristics.